JUDGMENT Satish Chandra, C.J.
1. On September 2, 1976, the Tax Recovery Officer, Income-tax Department, Varanasi, respondent No. 1, issued a notice under Rule 31 of the Second Schedule to the I.T. Act, 1961, to the Union Bank of India and the Central Bank of India, respondents Nos. 4 and 5 hereto, directing them to hold certain amounts of money subject to further orders of the TRO and to remit the same to the Tax Recovery Officer within fifteen days of the receipt of the notice. The notice gave the following details:
Name Date Recovery certificate number Amounts Rs.
M.
Habibullah 13-3-73 43, 44 & 45 30,312 5-3-73 43, 44 & 45 2,57,859 2,88,171 Barkat Habib 12-3-74 702/B 13-3-73 63-AW 5,58,591 5-3-73 63/701/B 5,024 22,671 5,86,286 Shaukat Habib 13-3-73 725/S/62/AW 8,228 12-3-73 328/63 2,54,945 5-3-73 725/S 1,876 3,06,049
2. From this notice, it would appear that a sum of Rs. 2,88,171 was alleged to be due from M. Habibullah while a sum of Rs. 5,86,286 was due from Barkat Habib and a sum of Rs. 3,06,049 from Shaukat Habib as arrears of income-tax. The notice stated : "Whereas the aforesaid three gentlemen have not paid the income-tax dues, the Tax Recovery Officer desires to attach the sums of money or the property now in your (bank's) custody in the name of Messrs. Shaukat Trading Co. (P) Ltd., Bhadohi, Varanasi".
3. It is thus apparent that in order to recover the tax demand due from the three individuals, moneys belonging to M/s. Shaukat Trading Co. (P) Ltd. were attached. In due course, the Central Bank of India, respondent No. 5, remitted to the TRO a sum of Rs. 2,20,000, which was then lying to the credit balance of the petitioner-company, namely, M/s. Shaukat Trading Co. (P) Ltd. After remitting this sum of Rs. 2,20,000 a sum of Rs. 78,549 alone remained in the bank account of the petitioner-company. Similarly, the Union Bank of India, respondent No. 4, remitted a sum of Rs. 14,04,040, being the total amount of the credit balance in the account of the petitioner-company, namely, M/s. Shaukat Trading Co. (P) Ltd., Varanasi. This amount was remitted to the TRO, Varanasi.
4. At that time, namely, in or about September, 1976, Habibullah, Shaukat Habib and Barkat Habib, respondents Nos. 6, 7 and 8, were under detention under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act. They remained in detention from September 7, 1975, to March 25, 1977. The petitioner-company states that it remained unaware of the attachment and of the remitting of the moneys belonging to it to the TRO, Varanasi. When it came to know of it, it moved heaven and hell. It went from pillar to post but without any response or result. It met the ITO, the TRO and the Commissioner but with no result. It also went to the CBDT but evoked no response. It has now come to this court.
4. In the counter-affidavit filed by the ITO, respondent No. 2, it has been stated that the petitioner is not a genuine company. It was a dummy company owned by Sri N. Habibullah and the directors are closely related to Sri Habibullah or are his close business associates. Sri Habibullah has been doing business at different places and in various names. The gravamen of the counter-affidavit in substance appears to be that the bank accounts held by the petitioner-company were really the accounts of Sri Habibullah though in the name of the petitioner-company and, therefore, the attachment was justified and valid.
5. Learned counsel for the petitioner argues that the petitioner was a duly registered company. It has in the past filed returns in its individual capacity as a juristic personality. The ITO, who at that time was Sri C. V. Roy, who has filed the counter-affidavit, had himself passed the assessment orders. The petitioner-company had filed appeals which were allowed and the matter remanded for fresh assessment. For the assessment year 1975-76, the petitioner-company made an application under Section 146 of the I.T. Act which was allowed by Sri C. V. Roy, ITO, Central Circle, Varanasi, and the assessment for that year reopened. In none of the assessment orders or the appellate orders or the orders passed under Section 146 was it even whispered that the petitioner, who had filed the returns in the status of a private limited company was not a genuine company. From the materials on record, it appears undoubted that till now there is no finding by any authority that it is not a registered company.
6. Learned counsel for the department invited our attention to Sub-section (3) of Section 226 of the I.T. Act, 1961, to justify the notice of attachment in question. This provision says that:
"The Income-tax Officer may, at any time or from time to time, by notice in writing require any person...who holds or may subsequently hold money for or on account of the assessee, to pay to the Income-tax Officer... so much of the money as is sufficient to pay the amount due by the assessee in respect of the arrears."
7. Even if these provisions were to apply, in the present case, admittedly no notice was issued or served on the petitioner-company. It was argued that the petitioner-company held moneys for or on account of the assessees, namely, respondents Nos. 6, 7 and 8. The TRO, on the other hand, issued a notice to the banks directly which cannot be equated with a notice to the person who held moneys for or on account of the assessees. The banks held the moneys in accounts standing in the name of the petitioner-company. Banks could not be said to be holding moneys for or on account of respondents Nos. 6, 7 and 8. If the ITO's case was that the petitioner-company was a dummy company and the moneys really belonged to respondents Nos. 6, 7 and 8 or that the petitioner-company was holding the moneys for and on account of respondents Nos. 6, 7 and 8, in either case, it was incumbent upon him to issue notice to the petitioner-company requiring it to pay moneys to the ITO. If such a notice had been issued the petitioner-company could have-satisfied the authorities that it held the moneys on its own and did not hold it for or on account of respondents Nos. 6, 7 and 8. It has already been stated that no such notice was issued. The action of the TRO in asking the banks to pay the moneys to him was not justified. Since the petitioner-company was unlawfully deprived of the moneys, it is in all fairness entitled to interest at 6% per annum.
8. In the result, 'the petition succeeds and is allowed. Respondents Nos. 1 and 2 are directed to refund to the banks in question the amounts received by them from the banks totalling Rs. 2,34,040.40 with interest at 6% per annum. The banks on receipt of the amount from respondents Nos. 1 and 2 shall forthwith credit the same to the petitioner-company's accounts with them. It shall, however, be open to the respondents to take appropriate action which they may be advised in accordance with law. The petitioner-company will be entitled to costs.